Sony revival plan: Cut 10,000 jobs; refocus on phones, TV, gaming

Sony revival plan: Cut 10,000 jobs; refocus on phones, TV, gaming

Summary: Sony, only days after announcing a $6.4 billion loss, double its previous estimates, is to shed 10,000 jobs, or 6 percent of its workforce in the next 12 months.

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Days after Sony announced a $6.4 billion loss for the last financial year, chief executive Kazuo Hirai announced that 10,000 employees --- around 6 percent of its workforce --- will lose their jobs in a major reorganisation of the company.

The cuts will be made over the coming 12 months.

Reports emerged earlier this week that Sony's would cut as many as 16,000 employees worldwide, despite the company's silence, including many in its loss making chemical division.

To get the company back on track, Hirai's revival plan will focus the company's efforts on three areas: mobile devices, digital imaging, and its games consoles, with the hope the reshuffle would generate sales of $10.5 billion by March 2015 --- a profit margin of 5 percent --- compared to sales of $7.9 billion in the last financial year.

There's also a rising sector for Sony in the burgeoning medical space, as it eyes further opportunities in the industry. The company said it was looking for acquisitions and other "strategic" investments to generate further income. But Sony will have to overcome the shadow of medical equipment maker Olympus, the disgraced company linked through financial ties, as it battles with a $1.7 billion accounting fraud.

The company reorganisation will cost Sony $926 million during this financial year.

Sony competes on multiple fronts with its rivals, particularly with Apple and Samsung, which has become a global powerhouse in industries it covertly set out to achieve.

Its success came with the iPhone and iPad in particular, with high-performance game titles appearing for the iOS platform, along with camera technology that suits as a strong alternative to the traditional digital imaging market. In Walter Issacson's biography of the late Apple co-founder, it notes how Steve Jobs "perfected" the Apple television, thought to hit the market this year. Encroaching on territory it has yet to conquer, Apple's strategy in its already-established markets sets the company up for a high chance of success.

Hirai said he would widen the PlayStation Network further to integrate all Sony devices, replacing the three fragmented delivery platforms it operates. Details were sparse, with analysts complaining that Sony has had these plans "for a decade".

With the poor reception on the recently launched PlayStation Vita, Sony is hoping to regain control of its popular gaming sector. The handheld gaming console suffered a 20 percent price cut within its second week of launch, reports ZDNet's Hana Stewart-Smith. Sony said it had a "relatively successful initial launch", selling around 320,000 units in the first week, but the figure dropped to just over 70,000 by the end of the first fortnight.

Samsung remains a strong competitor also to Sony in smartphones and televisions. Sony's television business continues to haemorrhage money as it has over the past eight years. It has lost around $10 billion in the past ten years as it builds roughly 20 million sets a year.

That said, Reuters reports that Sony, Sharp, and Panasonic, Japan's three biggest television set makers, expect to report a combined loss for 2011 of $21 billion --- a figure by far more than Sony's entire market value.

But while it fails to generate profit for Sony, the company will rapidly reduce the number of models it makes by 40 percent by 2013.

The fact remains that unless Sony takes swift measures to reorganise itself, it cannot continue generating mass losses. Sony's efforts will hurt short-term but could lead to better investments, a reduction in loss-making side businesses, and return the company into profit within a couple of years.

But its lacklustre approach to tackling the competition could lead to further jobs being cut, just as the company tries to stay afloat. In an age of austerity, growth is needed to pull a country or a company out of difficult times. Instead of cutting jobs and slashing output, growth can be met by reinvesting into core quarters of a business.

With Sony, it's a simple case of failing to catch up with the market competitors. Will the tortoise win the race against the hare? It's unlikely, but at least for now it's still in the long-running marathon as it sprints to catch up.

Image credit: Sarah Tew/CNET.

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Topics: CXO, Data Management, Enterprise Software, Hardware, Software, IT Employment

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12 comments
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  • PSP vita was doomed to fail

    Mobile gaming has fallen wayside to mobile phones and ipads. PSP only has respectable sales in Japan where mass transit systems rule the daliy commute.

    Sony lost gamers due to PSN hack, and lost money on PS move (the wii mote and nunchuk knock off) while Xbox 360 got a resurgance of western casual gamers with the release of Kinnect while providing core Xbox gamers the tried and true FPS titles. Opposite of Sony, Xbox 360 is almost non exsistant in Japan.

    South Korean companies have been laying the lumber in the TV market place. Samsung, LG, and other brands are slowly eating away Sony's market share which at one point it ruled king. Even Vizio uses screens made by LG.

    Sony was never a front runner in android smartphone sales. Samsung, LG, Motorola, and HTC are the big dogs in that category.

    Sony still has some life left in the sports filming and photo industry. it still has sony pictures, and sony records. Sony will not go away, it just will evolve to other areas.

    Sony makes great products. It's just now, other companies can make great products at more competitive price.

    If apple were to throw it's hat in the video game console market it would make things more interesting.
    Bakabaka
  • Just treat the customer right

    Maybe they just need to learn how to treat their customers (by not loading rootkits on their computers, or taking away the linux portion from the PS3, or poor security allowing for major hacking events and week long downtime).
    simpleone71
    • Possibly, but I'm thinking of other aspects

      I've been a long-time fan of Sony TVs, and - when I shopped around last year - found that TVs costing twice as much, using LED edge-lit technology and hyping up energy savings of 50% (which, in real life, translated to $1.50/mo BTW), had hideous shadow detail - dark grays would be crushed to black and, yes, I know how to calibrate. So I went back to Sony, with a same 40" model that cost half as much, displays a far superior visual quality, and hardly costs any more money to use per month...)

      With more people losing jobs, enduring pay cuts, education loans, and everything else, nobody should be surprised about the problems in our economy. I've seen plenty of small businesses close shop, with any new ones daring to prop up close down as well, and why did we see so many new strip malls built when only more of them are closing down due to stores going under?

      But do not forget, one company whose CEO was told of an antenna problem by an engineer long before a product's launch (source: Bloomberg) , with said CEO yelling at customers and telling them "you're holding it wrong" when they found the problem (source: PCMagazine), yet that company (Apple) is still highly revered. If you or I ran a company, deliberately put out a product with a faulty design, and then rabidly blamed it on the customers, how long do you think we'd be loved in return?
      HypnoToad72
  • ps4

    sony you better rethink your strategy regarding limited used games, trade ins and buy backs. or me and i'm sure alot other poeple will not buy it.
    f23ghost@...
    • agreed...

      Being able to resell a game adds to the value of a new game. I never buy games new because I don't want to spend $40 on a new game when I can wait and pay $15 - $20. Sony sees this as a liability, but the guys that can't wait to buy the new games, they know they will be able to get back $15 on that game when they are done with it, so that encourages them to go out and buy the game at its highest retail price, (that is when it is first released.) Any measures to stop reselling detracts from the value of a new copy, thereby slowing down sales of new copies. It hurts both the customers and Sony itself.

      Once again, they just don't get it.
      mlashinsky@...
  • Be less evil.

    Long after the memory of Sony's specific sins regarding DRM and various other consumer-hostile actions have faded, the bad taste remains. Couple that with the network hack, and you have very low customer(I refuse to say consumer) confidence in a company that by all rights should still be an earth-shaking titan. Concentrate a little more on what the customer wants and needs rather than boxing them into your little space. We'll come back.
    jblakeney@...
    • Amen

      And as if they hadn't learned their lesson, just yesterday I read that Sony plans on locking down the PS4 so that only purchased games can be played. No more rentals, used games, or even borrowing a game from a friend. Wow, THAT will certainly win over more consumers. Of course the development houses may be happier (although that remains to be seen), but last time I checked there weren't millions of developers purchasing consoles.

      What Sony should be developing is bulletproof shoes, because they sure seem to shoot themselves in the foot a lot.
      Independent Voter
    • Possibly

      I never bought the PlayStation, but I forgot about their being hacked...

      Still, other companies have gotten away with far worse for years and are still deemed 'noble', 'vital', 'good', 'generous', 'philanthropic', and other half-truths or total-lies. I wonder where Sony's PR problem went wrong...
      HypnoToad72
  • Opps!

    The problem with Sony is they thought they were better than they really are!

    Seriously I don't know who's running the Company but they had to see there TV were over priced.
    After the Hack PS3 lost a lot of folks.
    I shop everywhere with my Visa but not in Sony Playstaion store won't recognize my card! The same one i use everywhere else but oh not Sony Store.
    You have to buy the cards to purchase things in Sony Playstation Store.
    SHAMKEN@...
  • Trashy quality at expensive prices

    Sony has been resting on the laurels of both its name and quality levels of 10+ years ago. It seems this strategy has finally jumped up and bitten them on the ass.

    For starters, their PS3 consoles are poorly constructed and extremely prone to overheating when played for hours at a time. Athough not a gamer, I own a repair shop. The numbers of PS3s I take in with dead lenses and overheated boards is about 20% of my shop's revenue. If a PS3 board is totally fried, the only option is for a customer to buy a new console.

    Sony's notebook PCs jumped the shark as well. I purchased one a little over two years ago; have had internal cooling fan problems from the start (and seen the same issue on customer repairs). I paid about $200 extra for Sony's "quality" reputation. Next time, it's either a bit extra for a Samsung or buying whatever brand with the specs I need is cheapest.
    aqr
    • Sony used to mean quality

      A good friend of mine is dainty and only buys the lightest laptops to carry around. Twice she has paid premium prices for the lightest Sony Vaio, and twice she had problem machines that Sony wanted Big $ to repair. She will never buy another Vaio again. When you buy cheap electronics and they last like disposable lighters, well, you get what you pay for. But when you pay premium prices for the premium products, you expect to get quality builds that last AND excellent support afterwards.
      mlashinsky@...
    • My 2010 Sony 17" notebook, with quad core, got up to 76C under testing

      The 2009 MacBook Pro (dual core) got up to 99C under the same conditions (Windows, Prime95).

      The Sony felt like cheap plastic, but it was definitely the properly-built unit under the covers. The 2010 MBP got over 100C, a website named my2011macbookpro talks of how to replace the sloppily-applied thermal grease to get temps down to 82C (my 2011 MBP also had sloppily applied grease and a lot of other issues other people reported, on iFixit, macrumors, and other sites), and the 2012 model has yet to be tested by enough people and nifty tweaks aside I feel sadly confident it will remain very hot under use as well...
      HypnoToad72